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Here’s How to Diagnose Your Business When Sales are Down

It’s time to ask the five “W” questions.

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Here’s How to Diagnose Your Business When Sales are Down

In my last two columns, we’ve discussed how to diagnose your business in terms of profit and inventory performance. In this third part, we’re going to discuss sales — the most commonly measured benchmark of business success.

Almost every business owner can compare their sales to previous periods, but diving into these numbers in depth and determining specifically what they mean and how you can correct them is another issue. 

So sales are down. It’s time to ask the five ‘W’ questions: Where, What, When, Who and Why.

Where: Determining sales are down is just the start. Which departments are down? Use your department and comparison reports to discover which areas have fallen relative to previous years. Are your sales down consistently across all departments? This might highlight a wider issue. If they are down in just one or two key areas, you need to determine which areas they are.

What: What product specifically within those areas has declined? It’s one thing to say diamond product has dropped off, but is it bridal? Earrings? Anniversary? Is there a drop in solitaires? Is the market turning to drop earrings while you are still trying to sell studs? You may be simply suffering a mismatch of inventory compared to what your customers now want, but without asking the question, you will never know.

When: When did the trend start? Chances are it began sooner than you noticed. Pinpointing the beginning of the trend will play a big part in determining why it has happened. What other factors occurred at this point in time that may have contributed? (A new competitor, a key staff member leaving, etc.)

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Who: If sales have fallen, then there must be an equal drop in sales per staff member. Is this consistent across all staff? Are there one or two staff members who have dropped the most? It may be a staff-related issue.

Why: Having answered the first four questions, you are now in a far better position to determine why it has happened and take action to rectify it. 

It’s one thing to know why sales have dropped, but another to analyze and do something about it. There is a feast of information available in your computer system that can provide you with the insights you need to take action — it’s just a case of asking the right questions to discover the source of the problem. 

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